Frequently Asked Questions

A. SBA has established a size standard for most industries in the economy. The most common size standards are as follow:

500 employees for most manufacturing and mining industries

100 employees for all wholesale trade industries

$6 million for most retail and service industries

$28.5 million for most general & heavy construction industries

$12 million for all special trade contractors

$0.75 million for most agricultural industries

About one-fourth of industries have a size standard that is different from these levels. They vary from $0.75 million to $28.5 million for size standards based on average annual revenues and from 100 to 1500 employees for size standards based on number of employees. Several SBA programs have either alternative or unique size standards, such as the Small Business Investment Company Program.

FREQUENTLY ASKED QUESTIONS
Financing A Business

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1. How do I apply for a SBA Loan Guarantee?

Contact a local lender and discuss your loan proposal with one of their loan officers. Be prepared to discuss your proposal in detail with the lender. You should have the following available for the lenders review: your business plan; your personal financial statements; your business financial statements (if already a business); collateral available to secure the loan; assumptions used in your projected earnings statements; management resumes of those involved in operating the business; and pro-forma balance sheets showing what the business would look like if the loan were granted. Be prepared to discuss your proposal in detail with the lender. The SBA can guaranty up to 80% of a small business loan; however, the lender must agree to loaning the money with the SBA guaranty. The lender will then forward your loan application and a credit analysis to the nearest SBA District Office.

2. What do I need to qualify for a SBA Loan?

SBA is generally looking for the following major items: A reasonable equity injection or down payment. For a new business SBA generally requires a minimum of 20% and may require up to 35%. This is generally in the form of cash. The owners or managers should have knowledge and experience needed to operate the business successfully. Businesses that SBA believes will generate sufficient profits to both repay their loan and give management reasonable compensation for operating the business.

3. What type of collateral do I need for a loan?

Repayment ability from the cash flow of the business is a primary consideration in the SBA loan decision process but good character, management capability, collateral and owner’s equity contribution are also important considerations. All owners of twenty percent (20%) or more of the business are required to personally guarantee the SBA loan. The SBA does not deny approval for a SBA guaranty loan solely due to lack of collateral; however, it can be used as a reason, in addition to other credit factors.

4. How does the SBA guarantee loan program work?

SBA acts like an insurance agency and provides a guarantee to the bank to cover the extraordinary risk associated with lending to small businesses. Since this is a bank loan, applications must be submitted to the bank and monthly loan payments are paid to the bank. The bank is also responsible for closing the loan and disbursing the loan proceeds. SBA’s involvement is limited to reviewing the loan application submitted by the bank to assure they meet eligibility and credit standards. SBA provides the bank with a written authorization outlining the conditions of the SBA guarantee; any material changes to this authorization generally require SBA approval. In the event the business fails, SBA may participate in the liquidation of the assets and will share in any losses to the bank.

5. Where do I Obtain an application for a SBA loan?

Applications have been provided by SBA to all lenders that actively participate with us. Applications can be obtained from the lender you will be working with, or at your local SBA Office. Many forms are also available online at www.sba.gov/library/forms.

6. What is the interest rate on SBA loans?

SBA does not set the interest rate on the loans, only the maximum rate the bank may charge. The actual rate is negotiated between the lender and the borrower. Rates range from 1% to 2-3/4% over the current prime rate.

7. If there is no break on the interest rate, why should I bother with all the paperwork for a guaranteed loan?

SBA’s financial assistance programs are designed to provide assistance to businesses that cannot obtain financing at reasonable rates and terms elsewhere. By having a SBA guaranteed loan, you are afforded the opportunity of having lower monthly payments due to the extended repayment term. SBA loans also may have a fixed rate of interest and a fixed monthly payment, which allows the business to better control expenses. SBA’s Notes do not have a renewal option, which means the funds are available for the entire term of the loan. The bank must comply with SBA rules and regulations, which prevents calling in the Note or foreclosure, etc. without just cause (generally failure to make monthly payments) and SBA approval.

8. How long do I have to repay a SBA loan?

The repayment term is generally between five and twenty-five years depending on the life of the assets being financed and the cash needs of the business. Working capital loans (inventory and accounts receivable) should be repaid in five to ten years. The SBA also has short-term loan guarantee programs. Ask your lender or call our Wisconsin SBA offices.

9. What if the lender declines me for a SBA Guaranteed loan?

Ask the lender what is wrong with your business plan and what you can do to improve it. Correct the business plan and resubmit it to the lender. If that lender is unwilling to approve the loan or submit the application to SBA, try another lender. SBA no longer has direct funds to lend and cannot provide financial assistance without a participating lender. The Small Business Development Centers (SBDC) and the Service Corp of Retired Executives (SCORE) can provide assistance. SCORE and SBDC are partly funded by SBA and one-on-one counseling is available.

10. What SBA Loans are Available?

The SBA enables its lending partners to provide financing to small businesses when funding is otherwise unavailable on reasonable terms by guaranteeing major portions of loans made to small businesses. Find out what SBA loan best suits your needs, or go to SBA's Financing Your Business page for a number of resources for access to capitol.

Three South Bay cities and San Diego will administer a $3 million loan fund to offer small businesses help when investing in facilities or improving property, it was announced Thursday.

We're focusing on areas of San Diego County that have been misused or underserved," said Assistant Commerce Secretary David Sampson, who made an appearance with the mayors of San Diego, National City, Imperial Beach, and Chula Vista.

The four cities are matching a $1.5 million U.S. Economic Development Administration grant to create the San Diego Regional Revolving Loan Fund.

"This unprecedented collaboration of four local cities will help retain existing businesses and jobs while attracting new ones," San Diego Mayor Dick Murphy said.

The fund will offer businesses in economically distressed areas loans for investments in new or rehabilitated buildings or property improvements. Officials said businesses in such areas often have trouble getting funds from traditional lenders.

Loans in the $150,000 to $500,000 range will supplement private financing.

For information about the revolving loan fund, call Trish Hughes-Raber, (619) 533-7454.

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